29 July 2021

Key insights

Europe – The European Commission’s summer economic forecast predicts the EU economy will rebound faster than expected. Activity in the first quarter of the year exceeded expectations. Also, the improved health situation permitted a swifter easing of COVID restrictions in the second quarter. EU GDP is tipped to grow by 4.8 per cent in 2021 and 4.5 per cent in 2022. Uncertainty and risks remain high.

Europe – European counties are now preparing to relax travel restrictions following progress with the vaccination roll-out. The EU digital green certificate facilitating inter European travel is now in force. It aims to facilitate travel within the EU. 

France – The European Commission has validated the recovery plan for France. This unlocks €40 billion-worth of European subsidies and loans out of the €750 billion NextGeneration EU Recovery Plan for Europe. 50% of these funds will be invested in the ecological transition and 25% in digital transformation. France will be the third largest beneficiary of this program after Spain and Italy, which will receive €70 billion each.

Italy – The country is set to receive its first allocation of €25bn in EU recovery funds by August. The country’s recovery plan will be administered across three levels – ministerial, regional and local. Stresses caused by COVID-19 on health services are continuing to ease. The proportion of intensive-care places taken up by COVID patients is down to 15%. This is half the level considered ‘critical’.

UK – Australia and UK reached an ‘in-principle’ agreement to liberalise trade on 17 June. This includes a commitment to substantially raise quotas for beef and sheep-meat imports into UK and eliminate tariffs over a 10-15 year period. Tariffs and quotas on Australian sugar will be relaxed over an 8-year period. Tariffs on dairy will be relaxed over a 5-year period. It also includes a commitment to mutual recognition of professional qualifications.

UK Some UK manufacturers and retailers have signed up for a new project, Foundation Earth. This involves front-of-pack labels that give an indication of environmental impact, including carbon emissions. The initiative could have some impact on Australian exporters following recent concern expressed by UK retailers on carbon footprint of products coming from Australia (See Food and Agriculture, below).

Market opportunities

Health

UK – The UK Health Minister has signalled that some NHS changes introduced to cope with the pandemic will likely become permanent – including remote consultations. This creates potential opportunities for Australian telemedicine and remote diagnostics companies.

UK – Introductions between Australian probiotic/healthy food companies and UK distributors indicates strong interest for Australian products in this sector.

EU / UK – Changes to UK and EU regulatory requirements for medical devices will likely impact Australian exporters. Austrade is working with exporters to explore issues, including for companies that currently operate across UK–EU markets. Exporters will experience three sets of major changes over the coming 2 years:

  • Transition to new, EU medical device regulation (MDR) requirements in May 2021
  • Transition to new, in-vitro diagnostic regulations (IVDR) requirements in May 2022
  • Transition to new UK Conformity Assessed (UKCA) marking requirements that will affect medical devices from July 2023.

Affected exporters should contact Austrade (see below). An overview of the changes affecting the regulation of medical devices in the UK and the EU is available here.

Defence and aerospace

France – The French government has brought forward several procurements, investment funds and other initiatives to act as stimulus during the COVID-19 economic downturn and for the post-COVID-19 period. In doing so, the French government, professional associations and defence primes have started emphasizing a preference for locally-produced solutions in procurement policies.

UK – Austrade is collaborating with the Australian Defence Export Organisation to organise a market briefing event for Australian industry on the UK MOD’s next generation ‘Future Air Tempest’ program, the UK’s Future Combat Air System. This is a £1.9 billion project to develop the next generation combat aircraft, replacing the Typhoon.    

UK – UK Prime Minister Johnson announced the biggest program of investment in British defence since the end of the Cold War. This involves an overall cash increase of £16.5 billion over four years. The commitment will enable the Government to invest in cutting-edge technology, positioning the UK as a global leader in domains such as cyber and space.

UK – There are growing opportunities for Australian cybersecurity and technology companies to work with the UK Government, and defence and security agencies. The National Cyber Security Centre (NCSC) – part of Government Communications Headquarters (GCHQ) – has reported a surge in cyberattacks and incidents this year. Protecting the NHS and health-related research is currently a major priority for the NCSC.

Manufacturing

Europe The European Commission is accelerating plans to achieve ‘strategic autonomy’ in the electric vehicle (EV) battery sector. The EU announced a further €2.9 billion funding to support research and innovation in all segments of the battery value chain following €3.2 billion announced in December 2019. The EU expects to produce batteries for at least six million electric cars by 2025.   

Czech Republic – The Czech Republic looks set to become a centre for laser physics and this will create opportunities for Australian industry. ELI Beamlines (a global leader in laser infrastructure) has been officially confirmed as a member of ELI ERIC (Extreme Light Infrastructure – European Research Infrastructure Consortium). The ELI project will be funded from Horizon 2020 (€20 million).

Germany – Digital design companies operating in Europe report that many SMEs are prioritising updates to their online presence. Business is therefore strong, with growing demand for freelance web designers. This may provide opportunities for Australia-based web designers.

Sweden – Swedish steel maker SSAB has opened a demonstration ‘green steel’ facility that uses hydrogen instead of metallurgical coal. SSAB aims to produce fossil-fuel free steel commercially by 2026, initially for the European automotive industry. SSAB currently imports A$300 million of thermal coal per year.

UK – Austrade is monitoring the impact of the new Brexit rules that will progressively restrict the ratio of non-UK or non-EU components that can be used in EV battery and vehicle manufacture over the next 6 years. This may encourage use of Australian precursors, by forcing EV-making companies to cease buying EV batteries from suppliers in Asia.

UK – The Government published a new ‘Integrated Review of Security, Defence, Development and Foreign Policy’ on March 16. It foreshadows increased spending on space projects, cyber security and naval shipbuilding. The review also identified reliance on rare earth minerals as a security concern. It describes a ‘tilt’ in UK foreign policy towards the Asia-Pacific region.

Logistics

Netherlands – Some Australian companies are considering Dutch logistics options after Brexit. The Holland International Distribution Council advised Post that, following Brexit, there is a warehouse boom in the Netherlands as companies are trying to sort out their EU supply chain. This is also impacting Australian companies with current logistic partners in the UK, and Austrade is providing assistance. 

Resources & energy

Spain –  The Government is pushing forward the energy transition and industrial sector agenda with the support of the EU´s recovery funding. The government will allocate €4.6 billion to finance strategic industry projects over the next three years including:

  •  €850 million for waste and circular economy
  • €1.6 billion for the green hydrogen plan that has industrial applications
  • €160 million for the aerospace sector
  • €40 million for R&D in sustainable automotive
  • €480 million that will partly go to sectoral digitisation projects

Half of this will be non-refundable European funds.  

UK – The UK’s National Infrastructure Strategy includes pro-electric vehicle (EV) policies, and funding for hydrogen and carbon-capture and storage (CCS). Major highlights for Australian industry include £1 billion committed to bring forward four CCS clusters by 2030 and another £800 million for the creation of the CCS Infrastructure Fund. A £240 million Net Zero Hydrogen Fund is also being set up.

Food and agriculture

Czech Republic – Border issues are preventing some Australian wool from being imported and processed. The Czech Republic is the second largest importer of Australian wool in Europe and one of only two markets globally that increased their imports of Australian wool in the last six months of 2020). Importers advise that barriers include: negative sentiments towards mulesing; China directly/indirectly subsidising exports of wool, fabric and clothing, and; an asymmetry in import taxes between the EU and China. 

Czech Republic – Australia’s ability to export premium meat into the Czech Republic has been stymied by a reduction in the shared quota for grain-feed beef. The shared quota for Australia, Uruguay, Argentina and New Zealand on a first-come, first-served basis has shrunk to 10,000 tonnes, which indicates little room for increased imports into the EU.

Germany  Reports from the wine trade say that Brexit will create problems and opportunities for Australian wine and food suppliers into the EU. Prior to Brexit, many Australian wine and food companies exported goods to the UK for British consumption and onwards distribution into the continental EU. Now that Brexit has occurred, Australian ag/wine companies will consider opening offices within the EU.    

Italy  The Italian HORECA sector – which refers to food service and hotel businesses – has been hard hit by the pandemic. 22,000 restaurants closed and over 500,000 jobs have been lost in the last 14 months. Six out of 10 restaurant owners recorded a decrease in turnover of more than 50% with little to no support from government. This will be an important consideration for agrifood exporters targeting this market segment.   

UK A group of UK manufacturers and retailers have signed up for a new project, Foundation Earth. This will see front-of-pack labels put on products to give an indication of environmental impact. The system behind the labels looks at farming, processing, packaging and transport. It assesses the environmental impact of a product based upon carbon (49% weighted), water usage (17%), water pollution (17%) and biodiversity loss (17%). Some of the retailers that are joining this initiative are M&S, Sainsbury’s and the Coop. This initiative could have some impact on Australian exporters if implemented across the whole retail industry. It follows recent concern expressed by UK retailers on the carbon footprint of products coming from Australia

UK  Austrade London is now a member of the UK Food and Drink Federation (FDF), the UK’s peak body for food and beverages manufacturers. Membership will increase the visibility of existing Australian imports, and help identify opportunities for collaboration.

UK – Major UK food retailers are boosting annual spending on UK-made food and drink products. A survey showed 74% wanted to see food businesses and retailers in the UK express more support for local British producers amid the pandemic and Brexit.  

UK Trial imports of premium stone fruit have met with a positive reception, although the lockdown hampers marketability in hospitality venues. Economic conditions are likely to remain challenging. Austrade in London is receiving enquiries from potential cherry importers. This could indicate a certain openness to trade as the COVID-19 restrictions are relaxed.